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As stock exchanges around the world merge to expand their
operations, financial analysts say the Nigerian Stock Exchange (NSE) is not
“ripe” for that kind of business. The New York Stock Exchange (NYSE), Euronext
and Germany’s Deutsche Bourse on February 15 reached an agreement to combine
business. If successful, the $10 billion deal will form the biggest exchange
operator in the world.
Also, the London Stock Exchange had on February 9 announced a
$6.9 billion bid to take over Toronto Stock Exchange operator TMX Group. The
move will create a combined group that will be jointly headquartered in London
and Toronto. The two companies are waiting for a review by the Canadian
government to finalise the process. However, Opeyemi Agbaje, an economic
analyst and chief executive officer of Resources and Trust Company Limited, a
business advisory firm, said,
“The Nigerian Stock Exchange (NSE) is a monopoly so the issue of
mergers may not be so relevant to us now,” adding that the global merger trend
“may be driven by profit and scale considerations since many global Exchanges
are now business ventures with profit objectives.” But Virginus Agada, a
stockbroker at Eurocomm Securities Limited, a stockbroking firm, disagreed that
the NSE is a monopoly market.
According to him, “The
issue of merger with another stock exchange cannot be thought of in our market
now. Is it not when you’re healthy that you begin to look for somebody to stay
with you? Our market is not that healthy and therefore it’s not ready for
merger talks now, but we may get there in the future.” He said although there
are benefits to enjoy in mergers such as economies of scale and chains of
ideas, “but I don’t think that should bother us now in this country. Right now
we’re trying to gain confidence from investors.”
He added that “no matter how large investors are willing to come
to the market; if you don’t have enough facility to support them they won’t get
quality benefits.” Mr. Agada, whose firm is one of the affected stock broking
firms yet to meet the NSE’s N70 million capital base requirement for
stockbrokerages, said, “If you want to merge, you should talk about things
other Exchanges can learn from you. We (NSE) have not even shown good examples
within the West Africa region and Africa at large let alone talking of the
developed worlds.”
Detola Olukorede, an equity analyst at Investment Option, a fund
management firm, said, “The NSE is not ripe yet for merger like it’s happening
around the world now.” He said this is because the nation’s bourse is still
“underdeveloped in terms of infrastructure and operation.”
Wave of mergers
The merger of the New York Stock Exchange (NYSE) Euronext and
Germany’s Deutsche Bourse is structured as a combination of Deutsche Bourse and
NYSE Euronext under a newly created Dutch holding company, which is expected to
be listed in Frankfurt, New York and Paris. According to the agreement, when
the merger is completed, Deutsche Bourse stakeholders are set to control a 60
percent stake, with NYSE Euronext investors commanding 40 per cent of the
combined mega-firm’s equity, on a fully diluted basis. The deal is, however,
expected to be closed at the end of 2011. After that, the merged group will
boast more than $20 trillion in annual trading volume and operations in several
European countries and the United States.
A similar case also happened in Asia. Singapore Exchange Limited and ASX
Limited, operator of the Australian Securities Exchange, announced their $8.3
billion merger proposal on October 25, 2010. The merger is expected to create
the fifth largest Exchange operator in the world. Meanwhile, reports say the
two companies released a revised proposal on February 15 in a bid to boost the
deal’s chances of getting regulatory approval in Australia.
